“While most businesses remain cautious, some companies are beginning to hire selectively to ensure they have the employees in place to capitalize on opportunities that may arise as a result of an improving economy.” –Max Messmer, chairman and CEO, Robert Half International
There are some mixed messages being flashed on the health of the U.S. economy right now: is a growth spurt shaping up, or do we have another stumble ahead that we’ll have to struggle through?
Results from the Ceridian-UCLA Pulse of Commerce Index (PCI) compiled by the UCLA Anderson School of Management shows the U.S. economy is essentially flat over the first two months of the year, with a February decline offsetting modest gains made in January.
With the index number this month enhanced to include adjustments for monthly workdays as well as seasonality, February fell 0.7%, following January's increase of 0.6%. This flat performance follows a robust 2.8% gain in December, noted Edward Leamer, director of the UCLA Anderson Forecast and chief economist for the PCI.
The decline in February's PCI prompts a lowering of expectations for the Federal Reserve's forthcoming Industrial Production report, he added. Based on data through January, a forecast for February's monthly growth of Industrial Production to be released on March 15 would have been 1%; now, looking at February’s PCI data, Leamer thinks that Industrial Production forecast might slip to 0.6%.
“February was disappointing, but the geographic pattern underlying the index suggests this was due in large part to extreme snowfalls during the month,” he stressed. "[But] we still need much stronger growth in the PCI to get Americans back to work. To sustain at least a 4% GDP [gross domestic product] number for the first quarter, the March PCI must be significantly stronger, over 1% growth. That number will be very important. It will reveal where the economy is headed and whether March truly is a catch-up month after a snowy February.”
Craig Manson, senior vice president and index analyst for Ceridian – which provides the electronic card payment data detailing the location and volume of diesel fuel being purchased by over the road trucking operations – noted that the U.S. economy could indeed be slightly skewed by this year’s record snowstorms. "Goods have to be transported for the economy to grow, so when snowstorms bog down that flow, it is reflected in our index and in the overall U.S. economy,” he explained.
Yet other metrics indicate companies may be switching back over to hiring mode – and that’s a big deal, because it indicates they expect their businesses to start growing again.
For example, The Conference Board’s Employment Trends Index (ETI) rose in February for the sixth consecutive month. The index now stands at 93.5, up from January's 93.2; and during the past six months, the index increased by an annual rate of 13.4% – the highest six-month growth rate since 1994, noted Gad Levanon, associate director for macroeconomic research at the group.
“The continued rise in the ETI suggests that job growth is about to begin," Levanon said. “The past two jobless recoveries in 1991 and 2002 were a result of a continuous decline in manufacturing employment. This time, the strong recovery in manufacturing production has already led to two consecutive monthly increases in manufacturing employment. We are likely to see this trend continue over the next several months, which will contribute to overall job growth.”
The latest Manpower Employment Outlook Survey, conducted quarterly by Manpower Inc., indicates U.S. employers have modest hiring plans for the second quarter this year. “We continue to see encouraging signs in hiring activity in the U.S.,” said Jeff Joerres, the firm’s chairman and CEO. "Key industries such as manufacturing and construction are seeing notable improvements on a year-over-year basis.”
Here’s some of the positive metrics Manpower is seeing, according to its survey data:
• Year-Over-Year Increase: With a seasonally adjusted outlook of plus 5%, employers indicate a moderate increase in hiring expectations compared to one year ago, when the seasonally adjusted outlook was negative 2%.
• Stability Continues: 73% of employers, a record-tying high, expect to keep staff levels stable, which is good news for the currently employed.
• Industries Recovering: 12 of 13 industry sectors surveyed report positive net employment outlooks, meaning employers in most industry sectors plan to add staff during the second quarter.
• Local Picture Improving: Among 201 surveyed metropolitan statistical areas (MSAs), 94% indicate a positive or neutral net employment outlook, indicating cautious optimism is becoming more widespread geographically.
Of the more than 18,000 employers surveyed across the nation, 16% anticipate an increase in staff levels during the second quarter this year, while 8% expect a decrease in payrolls, resulting in a net employment outlook of plus 8%, Manpower noted. When seasonally adjusted, the net employment outlook becomes plus 5%.
“U.S. hiring activity is still in neutral, but revving toward first gear,” said Jonas Prising, Manpower’s president of the Americas. “It's moving in the right direction, but it will take some time, with no major speed bumps, before it can accelerate.”
Let’s hope it keeps moving in the right direction, then.